How to Keep Track of Your Mutual Funds Investments

You must have heard about mutual funds. It is a modern tool of investment which is gaining traction among investors of all ages. That’s because a mutual fund is that investment tool which holds the potential to offer investors some decent profit. But since the mutual funds predominantly invest in equity, debt and other money market instruments, they carry a certain amount of risk too.

Just made you very first mutual fund investment? Congratulations. Now you must think your job is done, right? Wrong. Well, it is safe to say that your investment journey has just begun. But, investing in a mutual fund scheme leaves you only half way. Post your mutual fund investment, keeping a close tab on it is equally vital. Investment enthusiasts might take a lot of advice before making an investment plan for their mutual funds. Still, once the decision is made, a lot of these investors fail to do the due diligence of keeping a close tab on the performance of these funds. 

Mutual fund investments need periodic checkups as it is always a good habit for investors to have a clear idea about the possible progress and alterations in their mutual fund portfolio. A document like a mutual fund’s fact sheet might enable an investor to monitor their mutual fund investments easily. It is like a performance card signifying the potential progress of your mutual fund investments.

What is a fund fact sheet/performance card?

A fund fact sheet is a document consisting of detailed information of each and every scheme managed by the AMC or the mutual fund house. This document is usually published every month by the AMC and is generally simplified so that all investors are able to interpret it in a simple and easy manner. The monthly fund fact sheet usually entails:

• The past performance of all the schemes managed by the AMCs. Performance of all mutual fund schemes is available in connection with CAGR (short for compound annual growth rate), standard deviation, Beta and Sharpe ratio.
• A breakdown of all your mutual fund, including how much and where your money has been distributed.
• Specific details about the size of investment of each scheme managed by the mutual fund.

This fund fact sheet/performance card is generally available on the mutual fund website and appraising it is might be one of the ways to keep a close tab on your mutual fund investments.

How to track the performance of a mutual fund?

The current NAV or Net Asset Value of a mutual fund is usually listed on the fund’s website. Investors, if they wish, can compare the mutual fund’s benchmark index to the index chosen by the mutual fund company, for it to serve as an average for its returns.

If you ever decide on checking the performance of your mutual fund schemes, you should be able to compare it with other funds that fall in the same category. It is nearly impossible to judge a mutual fund scheme solely based on its performance. Apart from documents like fund fact sheets of the mutual fund schemes, several websites help you track and compare the performance of all mutual funds. This way, you may keep a close tab on the performance of your scheme and at the same time track how your other mutual funds the same category are performing. You can compare the mutual fund performance over a monthly, quarterly or six months.

When evaluating the performance card of your invested scheme, it is usually recommended to watch out for the factors and deviations that may affect a mutual fund’s performance.

Change in mutual fund’s management team

It is quite acceptable for the management of a fund to undergo changes over a period of time. However, frequent changes in the management at irregular intervals, may be a symbol of red alert.

Every time a new fund manager walks in, this often leads to a noticeable shift in the investment style and strategy. In such scenarios, it becomes almost mandatory for investors to track the expected changes in their portfolio to make sure that the scheme manages to preserve its primary investment objective.

Consistent returns from your mutual fund investment

You might get excited if your scheme is continuously churning high turnover. But, noticing a consistent and extensive growth rate in your mutual fund portfolio can be concerning too. High profits needn’t necessarily translate into high returns. If your fund is constantly gaining higher profits, it may be an indication that the fund management is aim at short term profits and not implementing a long term capital appreciation strategy. 

The bottom line

Investors are requested to allow their mutual investments to run for a period of at least six months to one year, before checking for the above stated discrepancies. A term period as short as three to six months may not be sufficient to analyses and evaluate the performance of any mutual fund scheme.

 Investments held for the long term have the potential to offer some better returns. Give your money some time to grow; let it do the hard work for you. Who knows, mutual funds might end up being one of the investment tools which might lead you to your ultimate financial goal.